Scoring A Windfall On Spot-On EIA Oil Inventory Forecasting Of Hurricane Jockeys

| About: The United (USO)

Summary

Ahead of last week’s inventory data, we suggested a big draw could result.

It is because of a phenomenon I have noted around Hurricanes.

Those who bet on our suggestion should have scored a windfall, as oil prices and energy relative shares jumped on a large “surprise” draw from inventory.

A few weeks ago we published a report suggesting "Hurricane Jockeys" played a role in driving oil prices beyond the $50 mark, with a little help from Saudi Arabia and the OPEC gang. We said there was a decent chance the storm chasers could still pull in a windfall if they were right about last week's oil inventory data. Well, they were, and you were too if you took advantage of our theory ahead of the data release three days later.

Data Impact Seen in USO Chart at Seeking Alpha

On Sunday October 16 (Sunday before last), my report Hurricane Jockeys was published to very little fanfare. It was hardly seen by anyone really as it was smothered by a slew of other data published on Monday morning. Actually, that is probably what will happen to this follow-up, but I've got a lot of work planned for this week so I'm moving forward nonetheless.

Anyway, "hurricane jockeys" was a pretty play on words in my opinion, attempting to give you the image of energy traders riding Hurricane Matthew like a race horse. You see I stumbled upon a phenomenon a few storms back, though I can't remember if it was this season or last. What happens is that when a major storm approaches and disturbs the Southeastern United States, and especially the Gulf of Mexico, it tends to impact the weekly crude oil inventory data at some point.

It seems that the anomaly is not yet well understood by the investment community, because it has created opportunities for traders in oil and energy securities time and again or at least for as long as I've watched. And I have not seen much discussion on business television about the catalyst, which probably says something about my still too small following. Let's work on that… Spread the word maybe.

It may be that my father's experience as a merchant marine or my own as a fisherman has helped me to see what happens in these instances. These major storms are dangerous for seafarers you see, and the owners and captains of these ships are not into risking losing them. So, what I believe occurs, and what seems to be proven by severe changes in weekly import data around the storms, is that ships ahead of the storm rush to port if possible, while ships which might pass too near choose instead to wait out the storm out of harm's way. That is the part that seems to matter most.

What this does is impact the steady stream of import flow into the United States, like what we saw last week. In its weekly Petroleum Status Report, the EIA reported a big draw from crude oil inventory amounting to 5.2 million barrels for the week ending October 14. It seemed clear it was due to the deep drop-off in weekly imports, which fell by 954,000 bpd in the period. Multiply that daily drop by the days of the week and you get the reason for the big draw from crude.

Anyway, investors who had read the title of my report and had blown it off are hopefully paying attention now. Those who had read my idea and still determined it was irrelevant probably raised an eyebrow and had that "aha" moment last week. Those who bet on it, well, you're welcome. That is because oil prices jumped after the news was released last Wednesday morning.

Oil Relatives

10-19-16

Day of Data

Release

United States Oil (NYSE: USO)

+1.8%

iPath S&P GSCI Crude Oil (NYSE: OIL)

+2.1%

Energy Select Sector SPDR (NYSE: XLE)

+1.4%

SPDR S&P Oil & Gas E&P (NYSE: XOP)

+1.7%

Exxon Mobil (NYSE: XOM)

+0.5%

Chevron (NYSE: CVX)

+0.5%

Occidental Petroleum (NYSE: OXY)

+2.7%

ConocoPhillips (NYSE: COP)

+2.6%

BP (NYSE: BP)

+0.2%

Total S.A. (NYSE: TOT)

-0.4%

Phillips 66 (NYSE: PSX)

+0.1%

Pioneer Natural Resources (NYSE: PXD)

+2.7%

Marathon Oil (NYSE: MRO)

+3.2%

Schlumberger (NYSE: SLB)

+2.5%

Halliburton (NYSE: HAL)

+4.2%

Click to enlarge

However, the popular press and TV media seemed to miss the catalyst last week, I believe because the storm was long gone and lost from the short-term memory of those following the news cycle. Eventually they'll grab a hold of it and I hope give me some credit, but I doubt it. Let me apologize to anyone who may have preceded me with this same game plan that I'm not aware of, and welcome you to point out your prior mention via the comment section below. If this sort of out of the box thinking is relevant to you, I welcome you to follow my financial column here at Seeking Alpha.

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